UBS: China's property slump likely to persist for at least 2 more years

The downturn in China's property market, now in its fourth year, is far from over and a recovery is unlikely for at least another two years, according to UBS's head of Asia Property Research John Lam.

In an interview with Bloomberg, Lam predicted that the country's troubled residential real estate sector will continue to decline before any signs of revival emerge. "Anyone who bought a home in the past 10 years has likely lost money," Lam stated, adding that this has "fundamentally changed people's expectations about home prices."

Lam forecasts that, barring major stimulus measures from Beijing, prices for pre-owned homes in China's top-tier cities will fall by another 10 percent in 2026, followed by a further 5 percent drop in 2027. As price declines shake the long-held belief that property is a safe investment, more potential buyers are expected to stay on the sidelines, he said.

The analyst also pointed to a growing preference for renting over buying, driven by rental yields in first-tier cities falling significantly below mortgage rates. His research indicates that the average rental yield in China's first-tier cities was 1.81 percent in October, compared to the national average mortgage rate of 3.07 percent.

Lam highlighted rental prices as an early indicator of supply and demand dynamics in the housing market, "because this metric is not subject to government intervention." He expects the downward trend in home prices to halt only once rental prices stabilize.